The Dev Team has released yellowsn0w, the 3G iPhone unlock. Its available NOW via Cydia, you'll need to add their source (check the release post for the URL - they'd prefer sites didn't link the repo url) then check your Changes tab - yellowsn0w should be right on top. If you don't know how, here's how to add a source in Cydia. Refresh if you don't see it. If you're reading this later, just search for yellowsn0w in Cydia (making sure of course you've added their source). As guessed (and confirmed a bit later) from their post earlier today, IT WORKS WITH THE 02.28.00 BASEBAND version - in fact, ONLY for that baseband version. Meaning yes, you will need to update in iTunes and then use PwnageTool on a freshly updated 2.2 iPhone if you DON'T have 02.28.00 right now. Running the unlock on older basebands will simply cause it to exit, and do nothing. "No harm, no foul."

All you do is go to the package in Cydia and install just like you'd install any other package. Boom - restart the iPhone, and...

...wait for the slide to unlock screen, then wait 10 or 15 secs more. If you don’t see your carrier name pop up, then remove your SIM, reinsert it, and wait 10 secs more. This is the step we’ll be working on eliminating next.

Then you're unlocked. A quick note for users whose SIM cards come preinstalled with menus or apps on them, you'll

...need to pull and reinsert the SIM once after rebooting the phone to engage the unlock. Even though it’s needed only once per boot, it’s still a nuisance and we’ll be fixing that ASAP... You’ll know if you fall into that “extra step” category if your carrier doesn’t show up within about 10 seconds of the slide to unlock screen.

There is a known issue with SIM cards that have STK (SIM Toolkit) application menus, these menus are usually items such as “top up” “get credit” etc. These menu items confuse the application sometimes, removing and reinserting the SIM fixes this issue.

Answers to some potential questions:

My modem software says I have {less than 02.28.00} - can I still unlock?
Yes, but you have to upgrade your baseband to 02.28.00 before you do anything. First restore completely to 2.2 in iTunes (just connect the iPhone to the computer, go to the iPhone tab in iTunes, and press Restore in the version area).You can follow this guide to jailbreak after, then install the unlock from Cydia.

Is this permanent? In other words, will I be able to upgrade my firmware when the next one comes out and keep my unlock?
No. This is a soft[ware] unlock, not a hardware unlock, so you'll need to do as we've mostly been doing - wait to upgrade on new firmwares (all current firmwares are unlockable as of now) until the Dev Team releases a patch. Of course we'll have details for you every time Apple comes out with a firmware update.

What if I WANT to remove the unlock?
yellowsn0w is completely removable through Cydia, the command line, and iTunes.

I'm still on [2.1 / 2.0.2 / 2.0.1 / 2.0] firmware on my iPhone 3G, but would like to upgrade... what should I do?
Back up your iPhone. Restore in iTunes. Follow this guide to upgrade to 2.2 jailbroken, then simply install yellowsn0w from Cydia when you're finished - unlocked, jailbroken, enjoy.

I have T-Mobile, and they've recently upgraded their network to include 3G. Can I use the T-Mobile 3G data network with my unlocked iPhone 3G?
No - T-Mobile and AT&T use different 3G frequencies, so your iPhone 3G won't pick up T-Mobiles 3G network. You CAN however still use T-Mobile EDGE and GPRS just fine with the iPhone 3G - as well as all T-Mobile's voice features, and WiFi of course.

I have AT&T. I don't plan on selling my iPhone anytime soon, and I'm staying with AT&T. Is there any benefit for me to unlock my iPhone?
Nope. Aside from the ability to use the iPhone 3G on other networks than it comes locked to (T-mobile in the States, various carriers elsewhere), and the higher potential asking price if you sell your iPhone unlocked, there are no benefits to unlocking your iPhone.

OMG WTF BBQ!!!! This is awesome and I want to donate. Who do I send money to?
Don't. They like uh... post cards. Scanned. And emailed.

I think you're wrong about the basebands it will work with. I have an older baseband, and I'm going to run the unlock anyway. I think it will magically work in my case.
I'm going to have a sandwich. After we each do these things, lets reconvene and see who's happier.

[B]Edit: T-Mobile USA Users must turn off the 3G toggle in settings.

Everyone: You MUST have your SIM card in (without the proxy chip) throughout the entire process. With your SIM card installed... Install yellowsn0w 0.9, then reboot and wait up to 2 minutes for the phone to get service. If it doesn't work then uninstall 0.9 and try version 0.91. Keep reporting

If you have a SIM PIN you will need to REMOVE this first before running yellowsn0w... it is not compatible (yet)[/B

EDIT: In case there is still any confusion about how to unlock your 3G iPhone, a tutorial has been created. Be sure to read the instructions very carefully so that you are on the right firmware or you maybe never be able to unlock your 3G.IPhone 3G Unlock Guide - ModMyi - Wiki